12 Critical Mobile Monetization Concepts (Part 1 of 3)

Context:

In October of 2011, an article about DeNA included a number of key mobile monetization insights:

High Ass ARPU: Claimed $12 ARPU (average revenue per user) – this was a strong indicator that there was a meaningful way that DeNA was designing monetization in their games not found outside of Japan

User Psychology: Revealed their concept of user stress (“stress and release”) and the role of user frustration to monetization

User Clusters: Advocated different treatment for different “play styles.” Third party analytics companies such as Playnomics and Playhaven only recently implemented segmentation and targeting by user types… but this can be taken much further.

This article and other similar reports about Japanese mobile games should have alerted us that a whole science behind mobile monetization existed that we, outside of Japan, were very unfamiliar with. Further:

Localization Required: Not to say that the same mobile games that are earning $12 ARPU in Japan will do so here. However, I posit that the same tricks can be applied to games for the U.S. market with the right presentation and customization. For example, see the changes to GREE’s Modern War in February of this year that allegedly more than doubled their ARPDAU.

Non-Japanese Suck at Card Battle (for now…): Also, I contend that there is a lot of nuance and complexity in the design of Japanese games (e.g., card battle that comprises the majority of revenue in Japan’s mobile market) that those outside of Japan have yet to master.

In fact, Kenji Kobayashi who was interviewed for the article specifically calls out Zynga for not really knowing how to do monetization well.

I think that Zynga has not really researched monetization. I think that people who don’t know much about the Japanese market just dismiss those users as crazy, but that’s not the case. You really need to research thoroughly at what time monetization becomes the most fun for your users.

– Kenji Kobayashi, Management Director at DeNA

It’s no accident that the highest mobile monetizing game in the world right now is from Japan: Gungho’s Puzzles & Dragon that reportedly generates $4.9M per day in revenue.

So what are we missing and how can we catch up? I can’t claim to know all of the secrets but I’d like to try to help you get on the right track with this blog post series (to be separated into 3 parts).

Let’s go… 🙂

12 Key Mobile Monetization Concepts:

This series of blog posts will discuss 12 monetization concepts that can help you design monetization into your mobile application better. These concepts have been framed from the perspective of a mobile game but I believe many of these concepts can be applied to any mobile application.

Further, I have divided up the 12 concepts into 3 levels of mastery to help organize the blog topic content into the associated 3 blog post parts. I will write about 1 mastery level per post.

The 12 Critical Monetization Concepts by Mastery Level:

#1. Mechanics Design

A mobile game’s monetization mechanics should be considered from the very beginning. Further, there should be a clear idea of what the monetization mechanics in the game are and at least a strong hypothesis of how well the mechanics will monetize.

Key Question: Based on the type of game (or app) you are developing, do you believe the key monetizing mechanics will monetize enough to be successful?

What is the game/app type?

Games with high retention (e.g. Subway Surfers) or viral (e.g., Candy Crush Saga) don’t need to have as high of a monetizing capacity as a hard core RPG (e.g., Rage of Bahamut) but obviously needs to be competitive.

Can you win?

For the specific game/app type, you need to have confidence that the monetization mechanics used can beat competitive games in the same category and overall (top 100 grossing)

A useful tool to analyze this is an ARPDAU contribution table which I have written about: here.

He who knows when he can fight and when he cannot will be victorious.

– Sun Tzu

You should make clear from the very beginning whether your game even has a chance at success. The mobile gaming space continues to be one of the most intensely competitive markets in the world.

#2. Engagement over Monetization

With this concept, a game needs to always prioritize engagement and user retention over monetization. In this view, you must be able to get a user hooked into the game and repeatedly playing the game before you can easily monetize them.

Just as drug dealers give free samples to hook users before making them pay, engagement must be established prior to monetization.

However, I do have two reasons for sort of hating this concept: 1. This concept has been adopted by the usual industry conference speakers and other “pundits” and repeated ad nauseum and 2. Too many mobile game developers use this as an excuse not to carefully think through game monetization and rationalize poor game performance.

In using this concept, your mobile game launch strategy should carefully stage the implementation and execution of various monetization features carefully while prioritizing engagement and retention. Hence, higher risk monetization features or events should be gradually introduced and engagement/retention features implemented first.

Monetization and Retention are the Yin and Yang of LTV (life time economic value of a user) but that’s not to say that one doesn’t come before the other.

#3. Shop Volume & Monetization Capacity

It’s amazing how some games do as much as possible to not take your money. Once your shop has been designed, try to perform the following exercise:

Go into the shop and purposefully find ways of spending money.

How much are you able to spend?

At what points in the game can you continue to spend?

“Shop volume” speaks to the potential for your shop to monetize users based on the breadth (types) and depth (number, repeatability, and quality) of products in the shop.

Breadth: There should be an interesting mix of types of products and categories in the shop

Depth: In each shop category there should be a good mix of soft and hard currency items. Further, there should be a number of items that users really want to buy at every stage of user progression (e.g., by level, etc.)

How big is your app’s Shop Volume?

Note: Even if the shop only sells one type of item or even one item, so long as that same item can be monetized a lot (or even better infinitely) then Shop Volume should be considered high.

An associated concept with Shop Volume is the concept of “Monetization Capacity”. This refers to the ability to continuously sell more hard currency items to the user without materially disrupting the game balance or economy. I believe the usual Japanese mobile game company suspects refer to this as “Unlimited Monetization Potential” and is a key characteristic of card battle games using Gacha Fusion.

In the above diagram, you should be able to continue to sell an unlimited amount of hard currency items while maintaining a power gap within acceptable game levels. Game balancing is outside the scope of this article but does impact monetization in that without proper game balance, monetization limits will manifest. Power gap is maintained by various methods such as: 1. logarithmic power growth, 2. multiple upgradable units (e.g., card battle decks with multiple upgrade paths required), 3. user power matching in PVP, etc.

An optimal power gap level is one in which you maximize monetization while minimizing user disengagement (and especially rage quitting which is then difficult to do user re-acquisition for). Acceptable power gap levels are typically defined by an operations or monetization group to set KPIs of user disengagement.

#4. User Flow

User Flow refers to a user’s activity path within a game. Utilizing this concept, you should embed monetization points within a user’s set of activities. Whether within the core loop or whatever other activities the user engages in, you should design monetization calls to action where the user actually goes in app.

We cannot just rely on the user to tap within shop to monetize the user.

See the examples below:

Example #1: Candy Crush Saga (Core Loop Flow Pre-game Boost)

Here, the King.com guys built a monetization point directly within the core loop prior to starting any game.

Example #2: Mino Monsters (Character Profile Flow Upgrade Option)

As users browse their character they are presented with upgrade options for hard currency.

In this example, users are presented with a monetization mechanic that randomly occurs within the PVE flow. Users are presented with the opportunity to guarantee a loot drop by paying hard currency for a special feed (in this case the Vomp Carrots which are purchased via hard currency).

In summary, as all three of the examples show, we must intercept the user within their User Flow to give the user as many opportunities to monetize as possible.

Mobile Monetization Concepts Conclusion

In conclusion (for now), I hope you have now mastered the first level of mobile monetization mastery.

Prepare for gaining an additional level of mobile monetization mastery upon my next blog post. 🙂

Gregan, man have I been swamped… I was traveling and had to deal with a bunch of personal issues but I should be able to start posting again starting next week. I may not do part 2 just yet but will start posting again.

Some great info. I like how you put some tangible models around how to approach these major problems mobile developers face. The ARPDAU contribution table from your other post is also a great tool, and I’m giving it a whirl for a new game I’m publishing. We’ll see how things turn out. Keep up the good work, and I’m excited for parts 2 and 3!!

Hi yariyari… so I have purposely not published parts 2 and 3 yet… I’m thinking of trying to actually try to pay some bills by selling this content either as a PDF or as an Amazon Kindle digital book. Sorry… I’m happy to help people out but would like to experiment a bit with seeing if I can try to monetize some of my content.

Hi Joseph, I really appreciate this article – AND your need to make it pay.
Personally I wouldn’t hesitate to pay $2 to $4 on a PDF that had 3 times the info above – especially if the first part was free (like it is) so I knew it was this good 🙂
One more thing though. A few more hyperlinked words would help – even if it is just to Wikipedia – it would make it feel like I’m getting a fuller view at the areas under discussion. Maybe a few more visual examples too, with some contextual captions: a line or two about whatever game is being shown. Particularly as this is mostly about the largely unseen world of Japanese games.
Good luck and I hope this helps.

Hi Kim,
I have been in the mobile industry for over 8 years now. Your article is great and I am also interested in getting parts 2 and 3. I believe such work deserves to be paid as well. Amount mentioned by Jambamatt seems fair to me. When do you plan to make a decision? I can’t wait to read next parts
Cheers

Hi Joseph,
Thanks for your prompt feedback. I would have to consider but to be honest I don’t think I would spend more than 5USD for the 2 remaining parts. Keep me posted in any case when you make your pricing decision
Cheers

Interesting. I didn’t understand so much about marketing and so on, but I currently playing some japanese version card battle games made by Ameba (CyberAgent).

To be frank, you don’t need any particular strategies in your gameplay. You just need strong cards, spend your money and time. No strategies needed. That’s might be and actually boring. Actually the users always complain about the game, even now.

How did the company get so much money?

Well, first, they made the users register their phone number if the users want to use the card trading place in the market. Why? Because bills will be paid through the mobile phone companies.

Second and maybe the most important is the Gacha. Japanese really love the gacha, i dont know why. I dont like gacha concept, because it merely takes your money without you get guarantees of what benefit you can get. The company gets money and the users get frustration. The users always lose.

But still, the users will do the gacha. “Maybe this time I’ll get the super rare card!” and they keep paying for that. It’s like drug. I always think how foolish of them to be ‘tricked’ like that.

The companies just ‘innocently’ made gambling into card battle games. It’s just that. For me, that’s a shame for gaming world.

Just read this post. Really relish having the 2nd and 3rd parts and happy that you taught the class to peeps. Will not mind paying if you manage to write an ebook or video of sorts. 🙂 Cheers and thanks for the awesome articles 🙂

Just wanted to add my voice to the chorus of others that have requested the additional parts to this preview. It’s great stuff and super useful…thanks for putting in the effort to teach the rest of us.

Thanks Yuri! It’s been many years since I wrote that… lol, yeah maybe it’s time I revisited and updated this piece. There’s been a lot of innovations since I originally wrote that post. Thanks for the kind comments though!

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Business and life philosopher. Clash Royale Fan. Father of 3 crazy kids. Mobile gaming executive currently working at NBCUniversal Games & Digital Platforms group. All opinions expressed in any of the content found on this website are my own and do not represent the opinions of my employer. More.